Investment News & Views

Crossing Point Update

At our weekly video conference investment management committee meeting earlier this week, we decided to maintain rather than extend our current equity exposure. We are continuously watching, seeking to progressively move back into markets and are currently fully invested in our US and Global allocations and 2/3rds invested in UK, Europe, Japan, Pacific and emerging market allocations. We are also fully invested in our fixed interest allocations.

We delayed any decision to increase our exposure until we see a more consistent upward trend in equity markets. This week has however seen some useful rises with the FTSE 100 and Dax up 4.15%, the Hang Seng up 3.1%, and the S&P 500 up 2.2% in the past week. These rises have come on the back of lockdown exit strategies being implemented or announced. This week is an important results week with big US corporations publishing their Q1 results including some of the big tech giants. Results are expected to be poor as a result of the lockdown but if better than expected could encourage markets further. This recovery so far is looking better in terms of rebound than both the 1987 and 2008 crisis. The VIX index is in decline and P/E ratios are returning to pre-crisis levels as shown in the Datastream graph below.

US and Europe valuations break above long-term averages graph

We are still mindful that the general economic news is very concerning and while equity markets have given back meaningful asset value over the past month, we still are facing a recession, mass unemployment, and a ramping up of national and corporate debt.

We have been encouraged by the extent of market stability in credit markets that the Federal Reserve is offering. The Fed has allocated US$850bn to buy up all forms of credit including, credit card debt, car loans, student debt and commercial mortgages in order to stem bankruptcies. It is their broad and assured interventions that has underpinned confidence in credit markets and hence equity markets during these exceptionally difficult times.

Guardian Portfolios

As Guardian portfolios are aimed at both the growth and the defence of equity assets, our gradual move back into a full equity allocation is one we are taking once upward trends are evident. During a risk on, risk off market a trend can be difficult to identify and navigate. Therefore, our progressive stance has enabled us to participate in up markets while remaining cautious.

Heritage Portfolios

We have decided to make some strategic changes to the asset selection within our Heritage range of investment trust portfolios. We are doing this a little earlier in the year than we expected due to the change in dynamics emerging out of the Coronavirus crisis as markets stabilise and start their recovery.

With China now further ahead of other economies emerging from lockdown, we wish to take a direct holding in the Chinese economy rather than a broader emerging markets position. We also wish to extend our exposure to the tech sector as the real winners emerging from this crisis are the big tech companies like Amazon, Microsoft and Zoom. Internet shopping is hitting an all-time high as is internet use.

Heritage Dividend Portfolios

In mid-May, we expect to launch a new range of natural dividend paying portfolios. This range will benefit from the very strong track record that Investment Trusts have in paying dividends even through periods of great financial stress.

Investment trusts have the ability to smooth their dividends by saving money in reserves in the good times and using this to top up any shortfall in income in difficult years. This makes investment trust dividends a more reliable source of income for investors.

Standard Life Wrap

We are pleased to announce that Crossing Point portfolios will be available on the Standard life Wrap within about 10 days.

  • Thursday, April 30, 2020

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author

Professor Mike Buckle

Investment Officer

Mike chairs Crossing Point’s Investment Management Committee and holds the CII Certificate in Discretionary Investment Management.